November 2009 Tax Board Bulletin
The following summaries and links have been provided by Brian Wozniak IRS SB/SE CLD (503) 326-3343 Brian.Wozniak@irs.gov
- Economic Recovery Payment Verification
- COBRA
- IRS Announces 2010 Standard Mileage Rates
- First-Time Homebuyer Credit Extended to April 30, 2010; Some Current Homeowners Now Also Qualify
- Most Businesses May Take Advantage of Expanded Loss Carryback Option under New IRS Procedure
- IRS Issues Proposed Regulations on Reporting Requirement for Payment Card and Third-Party Payment Transactions
- Exempt organizations workshops coming to Seattle in May 2010
- Certain Annual Tax Reporting Statements May be Furnished by February 16, 2010, Without Penalty
- Proposed Regulations on New Broker Basis Reporting Requirement
- IRS Extends Food Industry Tip Reporting Program
- Special Tax Break on New Car Purchases Available in States with No Sales Tax
- IRS Will Begin Employment Tax Research Study in February 2010
Economic Recovery Payment Verification
Coordination is underway with SSA, RRB and VA to coordinate filing season inquiries regarding the impact of Economic Recovery Payments (ERP) on the Making Work Pay Credit (Schedule M) for some taxpayers. SSA has agreed that they will receive calls to verify the ERP at 800-772-1213 and will refer questions regarding the tax impact to IRS.gov. We are currently coordinating efforts with RRB and the VA.
There are seven new reject codes for the new Schedule M: RC 1130 - 1136. If the taxpayer submits a return and does not include any $250 Economic Recovery Payments sent to them by SSA, RR Retirement Board, or the VA – then their return will reject. The IRS has received information from each of the agencies that issued recovery payments last May and will be cross referencing taxpayer returns to ensure they report it – reducing their Making Work Pay Credit. If they file paper returns and don’t include the payment a math error notice will be sent.
COBRA
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COBRA timeframes were impacted by the passage of the Defense Department Appropriations, 2010 dated 12/19/09. Special assistance benefits will last for 15 months (extended from 9 months) and eligibility to qualify for the special assistance was extended to 02/28/2010 (extended from 12/31/09). The IRS.gov/Recovery COBRA page has been updated and a news release will be issued early next year.
IRS Announces 2010 Standard Mileage Rates
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Beginning on Jan. 1, 2010, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
- 50 cents per mile for business miles driven
- 16.5 cents per mile driven for medical or moving purposes
- 14 cents per mile driven in service of charitable organizations
The new rates for business, medical and moving purposes are slightly lower than last year’s. The mileage rates for 2010 reflect generally lower transportation costs compared to a year ago.
First-Time Homebuyer Credit Extended to April 30, 2010; Some Current Homeowners Now Also Qualify
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A new law that went into effect Nov. 6 extends the first-time homebuyer credit five months and expands the eligibility requirements for purchasers. The Worker, Homeownership, and Business Assistance Act of 2009 extends the deadline for qualifying home purchases from Nov. 30, 2009, to April 30, 2010. Additionally, if a buyer enters into a binding contract by April 30, 2010, the buyer has until June 30, 2010, to settle on the purchase.
The maximum credit amount remains at $8,000 for a first-time homebuyer – that is, a buyer who has not owned a primary residence during the three years up to the date of purchase. But the new law also provides a “long-time resident” credit of up to $6,500 to others who do not qualify as “first-time homebuyers.” To qualify this way, a buyer must have owned and used the same home as a principal or primary residence for at least five consecutive years of the eight-year period ending on the date of purchase of a new home as a primary residence.
For all qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 tax returns. A new version of Form 5405, First-Time Homebuyer Credit, will be available in the next few weeks. A taxpayer who purchases a home after Nov. 6 must use this new version of the form to claim the credit. Likewise, taxpayers claiming the credit on their 2009 returns, no matter when the house was purchased, must also use the new version of Form 5405. Taxpayers who claim the credit on their 2009 tax return will not be able to file electronically but instead will need to file a paper return.
The new law raises the income limits for people who purchase homes after Nov. 6. For homes purchased prior to Nov. 7, 2009, existing income limits remain in place. Several new restrictions on purchases that occur after Nov. 6 go into effect with the new law – see the full article for this and other details. For more details on the credit, visit the First-Time Homebuyer Credit page on IRS.gov.
Related Items:
- IRS YouTube Videos – English: New Homebuyer Credit, November 2009 and Spanish: Consejo Tributario: Consejos Tributarios de Fin de Año Noviembre 2009
- 10 Important Facts about the Extended First-Time Homebuyer Credit
Most Businesses May Take Advantage of Expanded Loss Carryback Option under New IRS Procedure
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Most businesses may use losses incurred during the economic downturn to reduce income from prior tax years, under a revenue procedure issued today by the Internal Revenue Service. The relief provided under the Worker, Homeownership, and Business Assistance Act of 2009 differs from similar relief issued earlier this year in that the previous relief was limited to small businesses. The current relief is applicable to any taxpayer with business losses, except those that received payments under the Troubled Asset Relief Program. The relief also applies to a loss from operations of a life insurance company. Taxpayers under the procedure may elect to carry back a net operating loss (NOL) for a period of three, four or five years, or a loss from operations for four or five years, to offset taxable income in those preceding taxable years. An NOL or loss from operations carried back five years may offset no more than 50 percent of a taxpayer's taxable income in that fifth preceding year. This limitation does not apply to the fourth or third preceding year. The procedure applies to taxpayers that incurred an NOL or a loss from operations for a taxable year ending after Dec. 31, 2007, and beginning before Jan. 1, 2010.
IRS Issues Proposed Regulations on Reporting Requirement for Payment Card and Third-Party Payment Transactions
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Beginning in 2011 banks and other entities must report payment card and third-party network transactions to participating merchants and the IRS. This week the IRS issued proposed regulations on reporting requirements for payment card and third-party payment transactions. Starting in calendar year 2011, the gross amount of payment card and third-party network transactions must be reported annually to participating merchants and the IRS. Individual cardholders are unaffected by this requirement, and none of the cardholder’s personal information will be shared with the IRS. The IRS also released for comment a draft version of new Form 1099K, Merchant Card and Third-Party Payments, which will be used to make these reports.
Exempt organizations workshops coming to Seattle in May 2010
There are going to be a number of Exempt Organization workshops in Seattle this May. You or your colleagues may be interested in this rare opportunity. CLICK HERE to see the details for Seattle
Certain Annual Tax Reporting Statements May be Furnished by February 16, 2010, Without Penalty
Notice 2010-09 clarifies that, for calendar year 2009, filers of Form 1099-B, Form 1099-S, and certain information on Form 1099-MISC have until February 16, 2010, to report both the information required on these forms and certain other tax information furnished on the same date. Notice 2010-09 will be published in Internal Revenue Bulletin 2010-3 on Jan.19, 2010.
Proposed Regulations on New Broker Basis Reporting Requirement
The Internal Revenue Service today issued proposed regulations under a new law that will require reporting of basis and other information by stock brokers and mutual fund companies for most stock purchased in 2011 and all stock purchased in 2012 and later years. The reporting will be to investors and the IRS. This additional reporting will be optional for stock purchased prior to these dates.
The IRS also released for comment a draft version of the 2011 Form 1099-B Proceeds from Broker and Barter Exchange Transactions, that stock brokers and mutual fund companies will use to make these expanded year-end reports. Form 1099-B, long used to report sales prices, will be expanded in 2011 to include the cost or other basis of stock and mutual fund shares sold or exchanged during the year. The expanded form will also be used to report whether gain or loss realized on these transactions is long-term (held more than one year) or short-term (held one year or less), a key factor affecting the tax treatment of gain or loss. The expanded Form 1099-B, to be first used for calendar-year 2011 sales, must be filed with the IRS and furnished to investors in early 2012.
The IRS welcomes comments on these proposed regulations and the draft 2011 Form 1099-B. Comments must be received by Feb. 8, 2010, and may be submitted electronically, by mail or hand delivered to the IRS. A public hearing is scheduled for Feb. 17, 2010, at the IRS New Carrollton Federal Building, 5000 Ellin Road, Lanham, Maryland 20706. The proposed regulations provide details on submitting comments or participating in the public hearing.
IRS Extends Food Industry Tip Reporting Program
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The IRS has extended for an additional two years its program that simplifies the recordkeeping burden for reporting tip income in the food and beverage industry. The Attributed Tip Income Program (ATIP) was first announced in 2006 in Revenue Procedure 2006-30. The program, which was originally set to expire Dec. 31, 2009, has been extended to Dec. 31, 2011, under Revenue Procedure 2009-53. Employers who participate in ATIP report the tip income of employees based on a formula that uses a percentage of gross receipts, which are generally allocated among employees based on the practices of the restaurant. Both employees and employers benefit from participation in the ATIP program. The IRS will not initiate a tip examination during the period the employer and employee participate in ATIP. Participating employees do not have to keep a daily tip log or other tip records.
Special Tax Break on New Car Purchases Available in States with No Sales Tax
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The Internal Revenue Service and Treasury Department announced that a tax break for the purchase of new motor vehicles is available in states that do not have a state sales tax. Under the American Recovery and Reinvestment Act of 2009, taxpayers who buy a new motor vehicle this year are entitled to deduct state or local sales or excise taxes paid on the purchase. The IRS and Treasury have determined that purchases made in states without a sales tax – such as Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon – can also qualify for the deduction. Taxpayers who purchase a new motor vehicle in states that do not have state sales taxes are entitled to deduct other fees or taxes imposed by the state or local government. The fees or taxes that qualify must be assessed on the purchase of the vehicle and must be based on the vehicle’s sales price or as a per unit fee. According to the IRS, Congress intended for these fees or taxes to qualify for this special tax deduction.
IRS Will Begin Employment Tax Research Study in February 2010
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Early next year the IRS will begin the three year Employment Tax National Research Project. Business practices regarding employment tax issues may have changed significantly since the last IRS employment tax study in the 1980s. The IRS will randomly select 2,000 taxpayers each year for comprehensive examinations to collect data on employment tax filers. Records pertaining to employment tax returns and issues will be subject to review during these examinations. Employers should have all of their records available to expedite these examinations.
